Academic journal article Journal of Accountancy

Conservation Easements

Academic journal article Journal of Accountancy

Conservation Easements

Article excerpt

Do you have a client who's interested in protecting the environment as well as getting a tax break? Recently, the Tax Court considered the deductibility of a conservation easement to a charity.

In 1988 Mr. and Mrs. Charles Glass purchased property on the shore of Lake Michigan. In the 1990s bald eagles returned to this area, and one roosted on their land. The property also was a suitable habitat for a couple of endangered plants.

In 1990 the couple gave a conservation easement on part of the property to a qualified charity. In 1992 and 1993 they gave two additional easements to LTV, a Michigan nonprofit organization, for the purpose of ensuring the scenic and natural resource value of the property would be retained forever by preventing development of the listed parts of the property. The easements did not restrict development of other parts of the property, which the Glasses used as a vacation home until 1994, when they converted it to their principal residence. They claimed a charitable contribution for both easements. The IRS objected to the deduction.

Result. For the taxpayers. IRC section 170(f)(3) normally denies a charitable contribution for donations of less than a taxpayer's entire interest in a property, but there is an exception for a "qualified conservation contribution." To be eligible, the property must be a qualified real property interest, the contributee must be a qualified organization and the contribution must be exclusively for conservation purposes. The IRS said the contributions met the first two requirements but not the third. …

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